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Small is Beautiful: Motivational Allocation in the Non-Profit Sector

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  • Gani Aldashev
  • Esteban Jaimovich
  • Thierry Verdier

Abstract

We build an occupational-choice general-equilibrium model with for-pro t rms, non-pro torganizations and endogenous private warm-glow donations. Lack of monitoring on the use offunds implies that an increase of funds of the non-pro t sector (because of a higher incomein the for-pro t sector, a stronger preference for giving, or an inow of foreign aid) worsensthe motivational composition and performance of the non-pro t sector. We also analyze theconditions under which donors (through linking donations to the motivational composition of thenon-pro t sector), non-pro ts themselves (through peer monitoring), or the government (usinga tax- nanced public funding of non-pro ts) can eliminate the low-e¤ectiveness equilibrium. Wepresent supporting case-study evidence from humanitarian emergencies and developing-countryNGOs.

Suggested Citation

  • Gani Aldashev & Esteban Jaimovich & Thierry Verdier, 2016. "Small is Beautiful: Motivational Allocation in the Non-Profit Sector," Working Papers ECARES ECARES 2016-02, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/223267
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    Cited by:

    1. Gani Aldashev & Marco Marini & Thierry Verdier, 2017. "Samaritan Bundles: Inefficient Clustering in NGO Projects," Working Papers 6/17, Sapienza University of Rome, DISS.
    2. Dur, Robert & van Lent, Max, 2018. "Serving the public interest in several ways: Theory and empirics," Labour Economics, Elsevier, vol. 51(C), pages 13-24.

    More about this item

    Keywords

    non-profit organizations; charitable giving; altruism; occupational choice; foreign aid;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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